By the very nature of wholesale, a carrier is serving its competition - competition that buys access when it brings customers to sites that the wholesaler’s network serves. However, an interesting analysis by Oppenheimer & Company’s Tim Horan offers a peek into a probable future with risks for the slow or unwary, and it started me thinking…
Currently, Horan points out, the greatest competitive advantage for carriers lies in their relationships with end users. Those costly local networks and monthly bills offer valuable links to both enterprises and consumers. However, growing and innovating players appear to be moving to take control of the customer with creative, well-integrated bundles of applications run from the cloud. Whereas our ATLANTIC-ACM research observes that most technological innovations of past generations began in larger businesses, moved to smaller businesses and early adopters, then to consumers, the nature of these newer innovations often begins with services that target consumers.
My favorite example of a set of converging applications offering a total experience comes from the show Downton Abbey. Lord Grantham had Bates, his valet, to serve him; Google Now is the 2015 equivalent. It can’t lay out your clothes, but it can tell you the weather for the day, traffic and commute times on different routes, what’s happening in your area, reminders of items you need when you’re near the store, reorder suggestions with links and delivery options -- all combined with email sorted by priority, social and promotions, and social networking on Google Plus. Given more time, Google (and competitors) will find more things you may need at your fingertips. As a result we’ll all expect more bandwidth, faster downloads and seamless interfaces to make this – and all our other data-intensive innovations – satisfying.
As a user of these services, you likely picture your phone or tablet as the hub, linked to the cloud and the new, expanding and evolving world of products and services. That smart mobile device in your hand is the key to the customer experience and integrated, personalised cloud services.
These expectations become marketplace demands from consumers and businesses, and they’re putting pressure on our industry’s networks. Incumbent network providers currently hold the edge on customer control, but internet-based service providers’ innovations are pushing technological advances faster than their wholesale providers are shifting to support them. To keep the upper hand on customer control, Oppenheimer’s Horan believes network providers need to offer the “same virtualised open-source equipment” and focus on the key elements in the network with a more horizontal focus. He points out that the ultimate winner will be the one that offers the winning operating system. (I am reminded of how the higher quality BetaMax standard lost out to VHS because VHS could record a four-hour show. More folks purchased the version that could save a full football game over the version with a higher-quality, one-hour segment. What might be the winning stroke for an internet equivalent?)
Today, the players innovating for integrated, cloud-based services are strong wholesale customers. (Think: Google, Skype integrated with Microsoft’s hosted Office 365 with PST, Twitter with Periscope, Facebook with Messenger, and many others.) As these providers of integrated cloud services add capabilities and increase their demand on wholesale networks, wholesale providers risk being too slow to support them. If wholesale providers are not positioned to adequately support these cash-saturated internet-based providers, existing wholesale customers will increase their investment in competitive networks. We have noted in past columns that Google’s data centre investments in targeted cities may be an attempt to goad their carrier suppliers to invest in more cloud-supporting infrastructure. Although we have heard many carriers tout that message, Oppenheimer’s insightful analysts underscore the need for more virtualised, open-source equipment than is being provided at the current pace.
In other words, just as the connectivity shifts from fixed to mobile, and provisioning moves from call centres to click-and-install, underlying network architecture itself shifts from hardware to software. The largest players – AT&T, Verizon, CenturyLink, Orange, NTT Group and others – have been aggressively deploying fibre and moving their networks to software-defined models and network virtualisation. However, it’s challenging to keep up with growing traffic on the internet-based players’ sites as they stack more and more new services. Speed to the customers – wholesale as well as retail- and speed to virtualised computing and software-defined networks is of the essence, and sure to become yet another in a long line of vital wholesale provider competitive differentiators.
